Government extends crackdown on tax avoidance schemes

Monday 23 July 2012 06:41 BST

Promoters of
aggressive tax avoidance schemes will be forced to disclose their client lists
to inspectors under a government crackdown, ministers will announce today.

Following a
wave of revelations about the financial loopholes used by the rich and famous
to legally side-step hefty tax bills HM Revenue and Customs is set to target
companies who offer deals that stretch the law to its limits.

Treasury
Minister David Gauke will tell the Policy Exchange think tank scheme operators
will be "named and shamed" for sharp practice.

Officials often
hit a dead-end when investigating schemes that are based off-shore but under
the proposals UK promoters will be made to hand over customer databases.

That
information will be used to formally warn clients directly about the deals they
have signed up to and to work out how much tax they owe if the scheme fails.

Under the
reforms, which will go out to consultation, a promoter who has been penalised
for not complying with the rules will also have to provide extra information to
HMRC on all of their schemes, not just the one they were reprimanded for.

Mr Gauke will
say: "We are building on the work we have already done to make life
difficult for those who artificially and aggressively reduce their tax bill.

"These
schemes damage our ability to fund public services and provide support to those
who need it. They harm businesses by distorting competition. They damage public
confidence.

"And they
undermine the actions of the vast majority of taxpayers, who pay more in tax as
a consequence of others enjoying a free ride."

Last month
comedian Jimmy Carr admitted to making a "terrible error of judgment"
after it emerged he used a complex scheme to reduce his tax bill. The K2
tax-avoidance scheme Carr is said to have used enables members to pay income
tax rates as low as 1%.

Tax avoidance
represents nearly 14% of the UK tax gap, according to the Treasury.